The massive overhaul of China's health-care system and plans by Chinese medical-device firms to boost their competitiveness globally are leading some Western plastics processors and industrial designers to step up investments there.
The country's health-care system is in the midst of major change. Government reforms — including a US$125 billion initiative to create universal access to basic health care by 2020 and to build or remodel 2,000 rural hospitals — are boosting demand, and that's leading to new investment from Western plastics firms like Italian filter component molder GVS Group and U.S. tubing maker Precision Extrusion Inc.
Also, the desire of Chinese medical-device makers to develop more sophisticated products that can better compete in global markets is creating opportunities for some industrial designers, such as Industrial Design Consultancy of the United Kingdom, which opened a Shanghai design studio earlier this year.
Many hurdles remain, however.
Some foreign medical plastics firms and medical industry officials interviewed at the China International Medical Equipment Fair, held April 16-19 in Shenzhen, say there are significant challenges, including protecting intellectual property, intense price competition, and quality issues that make much of the China market off-limits.
Still, overseas firms are finding niches.
Take Datchet, England-based design firm IDO, which worked with one of China's largest local medical-device makers, Shandong Weigao Group Medical Polymer Co. Ltd., to redesign a plastic suture package for global markets.
The six-month project saw the companies improve the design — so suture thread comes out more easily and doesn't tangle — and change the look of the package — to take it “from being very Chinese-looking to being very international,” said IDC Managing Director Stephen Knowles.
“It is lots of small details of the plastic design so it can all come together,” he said at CMEF, a twice-yearly event that pegs itself as Asia's largest medical-device trade fair, with exhibits from major Western firms like Abbott Laboratories and GE Healthcare.
Weigao, in Weihai, China, sought out foreign design help because the company wants to improve its penetration of international markets, said David Lee, manager of international trade for the firm's suture unit, Foosin Medical Supplies Inc. Ltd.
“Many people see Chinese products as low-level, garbage products, so it is very hard for us [to get attention],” Lee said. “But this is an important step. We are changing people's thinking of Chinese products.”
He said Weigao analyzed existing products for any weaknesses, such as whether suture thread is protected during transport and whether the product comes out of the packaging easily for surgeons. Initial feedback globally from customers has been good, Lee said.
It is the first time the company's suture unit has developed a product with both global and local markets in mind, he said.
Knowles said growing interest from domestic Chinese medical-device makers, like Weigao, led IDC to open a six-person industrial design studio in Shanghai earlier this year, focused entirely on the medical market.
Most of the clients are local Chinese firms, not multinationals, he said. Some of them want advice on going international, but others are focused on China's very price-competitive local markets and are looking for ways to stand out there, he said.
Plastics processing firms are also making investments.
Filter component molder GVS Group, for example, opened a 400-employee injection molding plant with 25 presses in Suzhou a year ago, said Mattia Passarini, China sales manager for GVS, based in Zola Predosa, Italy.
“We don't want to compete with the Chinese local competitors,” he said. “We are going inside the market with high quality. This is the direction China is going. … Most of the people base everything on price but we cannot compete on price.”
The firm expects to have 60 percent annual sales growth in China for the next several years, he said.
For some of the foreign plastics processors in the country, however, finding business among China's domestic medical-device makers remains difficult, with price being the biggest hurdle.
Janesville, Wis.-based Prent Corp. said most customers of its Shanghai thermoforming factory continue to be Western companies because the local market, while improving, still does not want to pay for the kind of plastic packaging his firm manufactures.
“They are still not ready based on quality,” said Patrick Tan, sales account manager for Prent [Malaysia] Sdn. Bhd.
As well, U.S. medical extruder Kelcourt Plastics Inc., with a small plant in Singapore, said the Chinese market is too price-sensitive for the company.
It's not clear how local Chinese firms can achieve their prices without taking shortcuts on raw material, said Kelcourt's Singapore-based sales manager, Sebastian Sia. Raw-material costs account for 80 percent of the price of medical-grade tubing and local competitors will sell for a 50 percent discount, he said.
Film extruder and thermofomer Sealed Air Corp. said only the largest Chinese medical firms are interested in paying for its packaging, and its customers remain mostly foreign firms.
Medical remains a small business for the firm's Shanghai film extrusion and thermoforming operations, “but the growth [in the medical market] is over 30 percent a year, so we look at the potential,” said Forrest Deng, sales development manager in China for Sealed Air's Nelipak products.
Figures from the U.S. government show medical-device exports from the U.S. to China are growing 40 percent a year.
U.S. firms comprise the single-largest country supplier to China's health-care industry, with a 30 percent share of imports, not including those sent through Hong Kong to China, according to Sherman Li, a trade specialist at the U.S. Commercial Service at the U.S. Consulate in Guangzhou.
U.S. medical-device exports to China have grown from $1.64 billion in 2001 to $7.96 billion last year, and China's market for the products is projected to grow 15 percent a year, he said. Some of the growth comes from China's policy to boost health-care spending in the countryside, said Li.
Before the 2009 reforms, only 20 percent of China's health-care spending went to the country's 800 million rural residents, according to a U.S. government analysis.
China's new policy is a big factor in the growth of business for U.S. firm Precision Extrusion, which opened a joint venture tubing factory in Hangzhou this year.
The firm is finding strong demand from local Chinese medical-device makers for its specialized, high-technology tubing that can't be made by local competitors, said Mike Badera, president of Glens Falls, N.Y.-based Precision.
“I believe the growth is driven by the government spending,” he said.